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Negligent Entrustment Is Based on What You Should Have Known

When a fleet vehicle is involved in a preventable accident, there is a high probability that the plaintiff’s attorney will seek to prove the company was guilty of negligent entrustment.

In fleet management, negligent entrustment refers to entrusting someone with a dangerous device (namely a company vehicle) and the entrusted party negligently causes injury, suffering, unfair loss, or harm to another person. The body of law that deals with this wrongdoing is called tort law and under tort law, the entrustor (the company) is held liable for this negligence.

Simply put, a company can be liable for any accidents or other problems if it can be shown that the company was negligent in its entrustment of a vehicle to a driver or the selection and maintenance of that vehicle. To minimize negligent entrustment exposure, all vehicles used in the course of business — whether owned by the company or the individual drivers — must be maintained properly, and this must be documented on an ongoing basis.

While negligent entrustment is an ever-present concern, a recent jury verdict percolated it to the top of everyone’s attention. On July 19, 2018, a jury in Texas awarded a plaintiff $101 million for a crash with a tractor-trailer in 2013. The indictment held both the company and its driver responsible, arguing the company was negligent in hiring the driver in the first place. The jury found the driver to be 70% at fault with the company at fault for the remaining 30%. The company’s negligence was calculated at $75 million. The plaintiff’s attorneys argued the company negligently hired the employee by violating its own safety policies and was negligent in its training and supervision contributing to the crash.

Most states impose liability when an employer knew or should have known that an employee was unfit to drive a vehicle, or that a vehicle was unsafe to operate. This standard means that companies must be able to show that they did everything they reasonably could to prevent an accident; otherwise actions it did or didn’t take might be construed as negligent entrustment.

MVRs Are Mandatory

In many ways, defending against negligent entrustment is demonstrating there is a process in place and the process is enforced. When a lawsuit results, you need to be able to produce documentation of any inappropriate actions by the driver, and proof that you did whatever you could to correct the situation.

Some companies take the approach that they can’t be held liable for something they don’t know, but that is the case with negligent entrustment. The standard is “should have known.” It is mandatory that a company pull motor vehicle reports (MVRs) during the hiring process to eliminate prospective employees who have a poor driving record. It is also wise to conduct MVRs on existing drivers at least once a year to see if their records have changed. Drivers may be involved in accidents, or they may get ticketed off the clock. It is important to stay up-to-date on this information. If MVRs are not monitored and a driver causes an accident, a negligent entrustment case will be close to impossible to win.

In addition, it is important to beware of expunged MVR records. Many states have a process where drivers can remove part of their driving record from view, hiding violations from potential employers. Most states, however, do not prohibit you from asking applicants about expunged records. Prospective drivers should be asked to list the violations, and you can decide whether or not to employ them. If a driver conceals expunged records, you are in a better position to defend a negligent entrustment claim.

As an aside, it is important to note aggressive attorneys will seek to extend company’s liability to employees who use their own personal vehicles to conduct any kind of company business. It is important to pull MVRs on occasional drivers and those who are reimbursed for the business use of their personal vehicles.

Training Is Often Overlooked

Many employers don’t provide operational training on using vehicles and vehicle-mounted equipment. All drivers should receive training upon being hired and that should be updated at least annually to ensure employees are qualified and remain up-to-date on new equipment, policies, and procedures.

This includes not only a vehicle, but also the operation of add-on equipment upfitted to a vehicle. A great deal of risk and potential liability can result from improper use of add-on equipment or ignoring faulty add-on equipment. Employers put themselves and others at great risk when they fail to train their employees on the proper use of equipment. Failure to ensure that employees fully comply with equipment-use policies will increase liability exposure.

You should have policies about the proper and improper use of add-on equipment. These policies should be regularly updated to ensure that they are applicable to the equipment that is actually in use. Toleration of violations of these policies without correction will be used to demonstrate negligence. Document that employees have been trained and discipline those who do not follow procedure. Employees should not modify equipment as any modifications may invalidate manufacturers’ warranties and release them from liability for injuries caused by defective equipment.

Negligent entrustment lawsuits typically focus on whether the company has an established safety policy and whether it enforces those policies. It is important to remember the standard for negligent entrustment is not whether the employer knows it has put people at risk; it is whether the employer should have known.

Market Trends

While technology is making vehicles safer, last longer, and be more environmentally friendly, it is also making them increasingly complex. As vehicles become more complex, so do all aspects of vehicle repairs.

One challenge for fleet managers interacting with procurement professionals is understanding the nuances of procurement terminology. Many fleet managers believe the term “procurement” is synonymous with the term “sourcing,” but there are important distinctions between the two functions.

When hiring prospective drivers it is important to beware of expunged motor vehicle records (MVRs). Many states have a process where drivers can remove part of their driving record from view, hiding violations from potential employers.

The recent U.S tax law changes created a problem for employers who use a non-accountable vehicle reimbursement plan. Negative feedback has some companies reconsidering the viability of offering company-provided vehicles to help key employees mitigate the adverse impact of eliminated tax deduction.

A truck’s total cost of ownership (TCO) covers a specific range of expense variables, regardless of the make or model. The four lifecycle categories that influence TCO are fixed costs, operating expenses, incidental costs, and depreciation/resale value. A key factor that drives these lifecycle categories is a vehicle’s service life.

Most in procurement take the position that fleet’s primary responsibility is to buy assets and services, which annually can range from millions to tens of millions of dollars in expenditures. This amount of corporate spend requires it be managed by someone with superb negotiation skills and proven procurement acumen.

If you want to provide added value to your company, you need to view fleet as a business and not simply an aggregation of assets to be managed cost-effectively. The fastest way to improve your bottom line is to increase fleet utilization, which increases the productivity of each individual truck.

Blog: Vocational trucks are susceptible to being targeted for staged accidents, which involves maneuvering an unsuspecting employee driver into an intentional crash in order to make a false insurance claim or to file a lawsuit against the driver’s employer.

Procurement initiatives to reduce fleet cost structure primarily focus on hard costs with secondary consideration given to soft cost reduction. Some procurement teams often don’t appreciate the sizable impact of soft cost reductions and how they can lead to larger hard cost reductions.

Procurement underperforms in cross-collaboration initiatives with other corporate spend categories, such as Environment, Health & Safety (EHS) and supply-chain management. A key collaboration opportunity is in the area of fleet safety.

A fleet cost reduction program goes straight to the corporate bottom line. If a company operates at a 10% annual net profit margin, reducing annual fleet expenses by $100,000 is the equivalent of generating $1 million in sales. Although fleet managers manage hundreds of thousands to tens of millions of dollars in corporate assets, only half are incentivized to achieve targeted performance goals. I advocate incentivization should be a universal best practice extended to all fleet managers.